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The policy implication from a recent paper released by the Federal Reserve Bank of Boston is that younger, less educated, and lower income consumers, as a group, may be adversely affected by the Durbin interchange fee cap.

The study looked at the relationship between credit scores and consumer payment choices. It found that even when controlling for several variables that affect payment behavior, consumers with a higher credit score have a higher probability of holding a credit card, and a lower probability of holding a debit card. Moreover, cardholders with higher credit scores were found to use credit cards for a higher share of their payments and use debit cards less.

The study postulates that if financial institutions attempt to recoup forgone interchange revenues due to the Durbin amendment by charging a debit card fee, consumers with low credit scores are more likely to be harmed by a debit card fee. Low credit score consumers -- who tend to be younger, less educated and lower income -- use debit cards more intensively than those with high credit scores because their access to alternative means of payment is restricted.

Read the paper.

Refinancing or home equity loan - this is the general question home owners find themselves asking. It might do them good to understand what inancing and home equity loan mean and the advantages and disadvantages of both these types of loans. It might be possible that a friend in similar circumstances as yours might have availed a home equity loan and might be finding it to be a good decision. This however wouldn’t mean that it would be best for you too. One must understand when to opt for inancing and when home equity might work out for the best. Refinance means once again financing the current loan. In other words, it amounts to availing a new loan to pay off the current one. Home equity loan would mean tapping the equity built on the current mortgage, so that it may be utilized to pay off the current loan and other debts.
 
  Refinancing may be of two types - simple mortgage inancing and cash-out mortgage inancing. In a simple inance, a new inance loan equal to the principal amount outstanding would be availed which would be paid to the lender of the current mortgage. In a cash out inance, an amount more than the principal outstanding would be availed so that there would be money left over after paying off the mortgage that may be used for home improvements ,to pay for the children’s college fees or to pay off other debts. For example, Mr. Jones and Mr. Cutter; both availed a mortgage loan of 0,000. Both have paid off 0,000 on their mortgages and Mr. Jones got a inance mortgage loan for 0,000 to pay off the outstanding principal of the mortgage whereas Mr. Cutter availed 0,000 of which he used 0,000 to pay off the outstanding principal and the remaining ,000 he used for other purposes. Mr. Jones availed a simple mortgage inance while Mr. Cutter availed cash out mortgage inance.
 
  Home equity loan inancing, on the other hand would mean that you would be using the equity that you might have built into your home. Home equity means the difference amount between the current value of the home and the outstanding of your mortgage. For example, if your home’s current value is 0,000 and the outstanding mortgage would be 0,000, then your home equity would be 0,000. Home equity would be treated valuable but it wouldn’t mean that it may be converted into cash.  It may be used to avail another loan where your home would be collateral. A home equity loan may be availed to consolidate debts, to pay off credit cards and to pay off any other debts. Usually this type of loan would have a higher interest rate. Availing a home equity loan might not mean that your original loan would reduce or that your monthly payments would reduce. It may so happen that in case you are not sensible in using this amount, you might end up with more loan than you originally had. A loan called the Home equity line of credit (HELOC) may also be availed. HELOC operates like a credit card as it would enable revolving credit with the amount of home equity being the credit limit.
 
  Mortgage inancing might seem to be the best option when you have a current mortgage that would be coming up for adjustment, the current mortgage interest rate that you might be paying might be higher and there might be a chance of getting a inance at a lower interest rate or if you require cash out to make home improvements and pay off debts at a lower rate of interest rate. It must however be noted that as for the first mortgage your credit scores would play a major role in deciding the i interest rate. The lender would require you to have good credit-rating, stable income and your debt-to-income ratio shouldn’t exceed 35% to give you the best rate of inance interest. It would be prudent to check your credit report and get any errors corrected so as to improve the credit score. It might be helpful to shop around for the best inance mortgage interest rates and terms before deciding on a particular lender. It would also prove to be beneficial to research the possible lenders before choosing one.